Van Andel and DeVos, Amway Co-CEOs; The New Way
January 31 2011 by Jennifer Pellet
While it may have been a while since the neighborhood Avon lady rang your doorbell, a pink Mary Kay Cadillac pulled into the drive or a colleague invited you to discover Amway’s skin-care line, the concept is going strong, report Steve Van Andel and Doug DeVos, co-CEOs of Amway International. In fact, the direct-selling company their fathers, Jay Van Andel and Rich DeVos, founded back in 1959 does a robust $8.4 billion in annual sales.
Sure, thanks to Wal-Mart and Web storefronts, value-priced cosmetics are within reach of American women in even the smallest, most rural of towns. And younger, hipper specialty shops like Sephora and Aveda are now virtually ubiquitous in more populated areas. But when the going got tough, this tough business got going—straight to emerging markets, where locals hungry for opportunity were quick to embrace the idea of buying the right to peddle beauty and nutritional products for commission-only pay. Today, Amway sells its more than 450 personal- care, home-care and nutritional products in 80 markets. Ninety 90 percent of its revenue comes from outside the U.S., with China accounting for the largest piece of the pie.
Of course, the road to an international sales base was not without speed bumps. Along the way, the Ada, Michigan-based company had to customize its products, distribution method and manufacturing to navigate trade barriers and market needs. Its foray into China in 1995, for example, ran into a wall just three years later, when Chinese authorities, fearing pyramid schemes and possible religious and political dissent spread door-to-door, banned direct sales. Eventually, regulators relented, but by then Amway had swapped its direct sales force for a “shops plus salesmen” structure that supplemented its entrepreneurial salespeople with more than 200 shops—a concept it has since embraced in other markets, including Latin America.
“We found that every market likes having a physical location that can be used as a training center, a product display center or someplace they can bring customers,” says Doug De Vos. “It became someplace our sales force can call home.”
Once known primarily for skincare products, Amway returned to its roots in one regard: Its biggest seller today is Nutrilite, a range of vitamin, mineral and dietary supplements that the founders sold before starting Amway. “There’s a huge demand for nutrition and wellness products around the world,” explains Steve Van Andel, who notes that the soap products the company was once known for now account for just 10 percent of its total sales. “In the U.S. we think of protein powder as something for body builders, but in China it’s a way for parents to make sure their kids get enough protein.”
In appealing to consumers in foreign markets, Amway’s model offers an edge. By drawing its salespeople—three million operators around the world—from the local population in each market, the company has been able to bridge cultural gaps and adapt more easily to consumer needs. “Our sales force is made up of nationals, so [when we go into any given country] we look like that country really fast,” explains DeVos. “What we’re trying to do now is become really good at being local in every market in which we operate. It’s not just a multinational effort, but really understanding what it means to be an Indian company in India, a Chinese company in China, a Brazilian or Mexican company in Latin America.”
“We realized that our model was a great way to get into a lot of markets fast, but not necessarily the most efficient way to run them on a longterm basis,” adds Van Andel. “Now we’ve really got to take a look at all the markets we’re in and figure out how to better service those customers.”
Finding ways to introduce technology while remaining true to their fathers’ founding business principle—personal relationships—is another challenge. “We’ll continue to have the relationship aspect of our business, because that’s one of the things that makes us different, but we are looking at how to leverage technology,” says Van Andel. Already, he says, sales reps can use an Amway application on their mobile devices to demonstrate products to clients. “They can not only show them the product, what it does and what it does for them, but they can take an order right then and there on their iPhone or iPad.”
Sharing the CEO seat is one area where Van Andel and DeVos don’t anticipate a struggle. Growing up right next door to one another, the two leaders had a front row-seat to a rare scenario: their fathers’ successful co-CEO leadership structure [See "Heard it on the Grapevine," p. 12, for another incidence of co-CEO successors]. “Their friendship was always a strength,” says DeVos. “They did everything together.”
“There were two things my father always said about the partnership,” adds Van Andel. “One was that two heads are better than one—that two people coming to a decision was always better than just an individual decision And that one way to make sure you make the partnership work is to never say, ‘I told you so.’”